C A B I N E T B R A H I N
DANSK-FRANSK ADVOKATFIRMA I FRANKRIG / DANISH-FRENCH LAW FIRM IN FRANCE
The sale granted under the suspensive condition of obtaining a loan
1. The conclusion of a real estate sale is generally subject to the obtaining of a loan by the purchaser set up as a suspensive condition. By several decisions rendered on the same day (some of which will be published in the Civil Bulletin of the Court of Cassation), the third civil chamber of the Court of Cassation has just provided important clarifications on the realization of this condition, in particular with regard to its articulation with the regulation on real estate credit.
While the condition precedent most often refers to obtaining a loan, other formulas are sometimes used (e.g., “obtaining a loan offer”; “granting a loan”); these differences have no bearing on the clarifications made by the Supreme Court.
Achievement of the condition by obtaining the loan
2. The Court of Cassation has specified that the suspensive condition of obtaining a loan is deemed to be fulfilled as soon as a firm and unconditional offer is made, characterizing the obtaining of a loan in conformity with the contractual stipulations (Cass. 3ème civ. November 7, 2007 n° 06-17.413 (n°1012 FS-PB), Kleinjan c/ Valat ; Cass. 3ème civ. November 7, 2007 n° 06-19.148 (n° 1013 FS-D), Sté Jasmin c/ Sté Plas).
As a result, it ruled that the following does not constitute a loan offer allowing the condition to be fulfilled
– a certificate by which a bank gives an agreement in principle to the purchaser for a loan of a given amount (judgment n° 06-17.413) ;
– the notification of a loan agreement, the implementation of which is subject to the completion of contractual formalities and the taking of guarantees stipulated in the future loan offer (judgment n° 06-19.148).
On the other hand, the condition is fulfilled when the buyer produces a printout of an e-mail from a bank to him, including a proposal for a loan of 105,000 Euros, under the conditions provided for in the promise and a subsequent letter from this same establishment notifying the bank’s agreement to this loan (Cass. 3ème civ. 7
November 7, 2007 n° 06-11.750 (n° 1014 FS-PB), Guérin c/ George).
3. In principle, the fact that the loan offer does not comply with the regulations on real estate credit (C. cons. art. L312-1 et seq.) does not allow the seller to escape the fulfilment of the condition and the formation of the sale. Indeed, the formal requirements set forth in the Consumer Code regarding real estate loan offers are only enacted in order to protect the borrower, who alone can invoke them (Cass. 3ème civ. November 7, 2007 n°06-11.750 (n°1014 FS-PB), Guérin c/ George).
4. However, if the parties to the promise of sale have taken care to specify the circumstances of the realization of the condition by expressly referring to the Consumer Code, the purchaser is required to obtain a loan offer given in writing by the lending institution (Cass. 3ème civ. 7 November 2007 n° 06-17.589 (n° 1015 FS-D), Modica c/ Borge). Consequently, a handwritten letter from the bank attesting that the requested loan was granted but that the offers were in the process of being edited could not be assimilated to the contractually defined loan offer (judgment cited above).
Information of the seller on the realization of the condition
5. The Court of Cassation had previously affirmed that, unless otherwise stipulated, the fact that the beneficiary of a promise of sale subject to the condition precedent of obtaining a loan does not inform the promisor of the refusal of the loan application before the expiration of the period of validity of the promise is not sufficient to characterize a fault in the performance of his contractual obligations imposed on the purchaser of such a nature as to increase the requirements of the text (Cass. 3rd civ. November 7, 2007 n° 06-17.867 (1016 FS-PB), Rinaldi c/ Turbet-Delof).
The violation of the clause obliging the buyer to inform the seller of the obtaining of the credit can thus be sanctioned only on the ground of the contractual civil liability by the allocation of damages but it is then up to the seller to establish that this defect of information caused him a damage. The proof of a prejudice is not necessary when the obligation of information is sanctioned by a penal clause (Cass. 3ème civ. 20-12-2006 n° 05-20.065 : RJDA 5/07 n° 448).
Realization of the condition in case of fault of the purchaser
6. The condition is deemed fulfilled when it is the debtor, obliged under this condition, who has prevented its fulfilment (C.civ.art.1178). This is the case when the buyer has applied for a loan that does not comply with the characteristics set out in the promise or the deed of sale (Cass. 3ème civ. 13-10-1999 n° 98-12.025: RJDA 12/99 n° 1306; Cass. 3ème civ. 30-3-2004 n° 02-11.688: RJDA 8-9/04 n° 941).
In a case where a promise to sell real estate had been concluded under the suspensive condition of obtaining a loan within one month from the signature of the promise, the Court of Appeal of Rennes had considered that the buyer had committed a fault leading to the refusal to grant the loan since, having contacted the bank only thirteen days before the expiry of the aforementioned time limit, he had not carried out the necessary diligence to apply for a loan within the time limits compatible with the expiry date of the condition. The Court of Cassation censured this decision on the grounds that the judges had not noted that the delay in the constitution of the loan application by the purchaser was at the origin of the bank’s refusal (Cass. 3ème civ. November 7, 2007 n° 06-14.227 (n° 1017 FS-D), Rougier c/ Musseau). The Court of Cassation had already ruled that article 1178 of the Civil Code does not apply if the non-fulfilment of the suspensive condition relating to the obtaining of a loan was not due to the delay in the presentation of the application but to the reasoned refusal of credit by the requested banks (Cass. 3ème civ. 17-3-2004 n° 02-17.984: RJDA 10/04 n° 1106).
Failure of the condition
7. When a condition is stipulated in the exclusive interest of one of the parties, only that party may rely on the legal consequences of the failure of the condition stipulated in his favor (Cass. 3ème civ. 16-12-2003 n° 02-16.327: RJDA 6/04 n° 662; Cass. 3ème civ. 20-6-2006 n° 05-12.319: RJDA 1/07 n° 25) or waive it (Cass. 3ème civ. 31-3-2005 n° 04-11.752: RJDA 8-9/05 n° 946). If the deed does not specify the beneficiary of the condition, the judges will assess the common intention of the parties (Cass. 3ème civ. 14-11-1976 : Bull. civ.III n° 382 ; Cass. 3ème civ. 16-12-2003 n° 02-16.327 : RJDA 6/04 n° 662).
8. The Court of Cassation has just confirmed a decision of the Court of Appeal of Caen which, in order to judge that it was not possible to determine the exclusive beneficiary of a suspensive condition, had retained the following elements the disputed condition appeared under a heading “protection of the real estate borrower”, the content of which also dealt with his relations with the seller and which followed two other headings bearing respectively the wording “in the interest of the purchaser” and “in the interest of the seller”; the obligations placed on the purchaser as he obtained the loan did not make it possible to hold that these provisions had been stipulated in his exclusive interest; the indication that, after a certain period of time without notification of the loan offer, the condition will be deemed not to have been fulfilled with regard to the seller and the latter will be released from any commitment, each of the parties then resuming their full and complete freedom, necessarily benefited both parties (Cass. 3rd civ. November 7, 2007 n° 06-17.729 (n° 1018 FS-D), Brinitzer c/ Pellerin). As a result, the seller could validly invoke the failure of the said condition.
Reproduction is authorized with mention of the source.
January 22, 2008.
Me Nicolas BRAHIN
Lawyer at the Bar of NICE
Nicolas.brahin@brahin-avocats.com
Diploma of Higher Specialized Studies in Banking and Financial Law
Panthéon-Sorbonne University (DESS 1997)
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080125 the sale granted under the suspensive condition.MIS
